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Corporate governance in banks

Published on April 27, 2016   16 min
0:00
Hello, my name is Azzim Gulamhussen. I'm a Professor of Financial Institutions at the Vlerick Business School in Brussels. Today, I'm going to talk to you about Corporate Governance in Banking.
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I will be covering the following issues, what are the reasons for the recent interest in Corporate Governance in banking, is corporate governance in banking different from the Corporate Governance of non-financial firms, how bank governance works in practice, the relevance of internal and risk governance for banking. After addressing these issues, I will summarize the talk and address some critical challenges going forward with corporate governance in banking.
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A first and obvious question relates to the reasons for the recent surge in interest in the corporate governance of banks. Prior to this crisis, failures in corporate governance in banking and their ultimate implications for solvency and liquidation where observed in isolated situations. Notable examples include the Bank of Credit and Commerce International and the Baring Brothers. In the case of Bank of Credit and Commerce International, the failure stemmed from the complexity and lack of disclosures and transparency of their cross-border operations. In the case of Baring Brothers, their failure stemmed from the lack of internal controls in their identification and quantification of risks and also misaligned links between short-term pay and long-term performance of the bank.